Contingency and succession planning: a sole principal’s plan for the unexpected

Snapshot

Sole principals are particularly vulnerable to disruption if suddenly unable to manage their practice due to illness, injury or death.

A contingency plan is to nominate a personal representative and alternate who would be responsible for conducting and, if necessary, disposing of the legal practice if the sole principal is unable to do so.

Where there is no contingency plan in place and a sole principal is suddenly unable to manage the practice due to illness, injury or death, the Law Society may need to appoint a Manager under the Uniform Law – a lengthy, disruptive and very costly process.

Sole principals are particularly vulnerable to disruption if suddenly unable to manage their practice due to illness, injury or death. While a lot of time may be spent thinking about plans and strategies for how to run and grow the business, often not as much consideration is given to how to exit the business, especially if that were to become unexpectedly necessary.

Appointing a manager to a law practice

If a sole principal becomes unable to manage their practice and there is no contingency plan, it may be necessary for the Law Society to formally appoint a manager to the practice. In these circumstances, the fees, costs and expenses of the appointment would be payable by the practice. If the interests of the public are not being properly addressed, the Law Society may exercise its right to formally appoint a manager to the law practice under Part 6.1 of the Legal Profession Uniform Law (‘Uniform Law’). This could be a significant financial burden for the practice to carry. Managerships in NSW currently cost between $10,000 and $200,000.

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